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Depending on the nature of the subsequent event, the financial statements may need to be adjusted or a disclosure may need to be made. •E.g., a major customer owing the company $1,000,000 files for bankruptcy on January 10. Because of the bankruptcy, the $1,000,000 may no longer be collectible. Although the filing of the bankruptcy petition occurred on January 10, the facts likely existed before the end of the year and the receivable may need to be adjusted.
A Deeper Look at Current Liabilities
CURRENT PORTION OF A LONG-TERM DEBT•The current portion of long-term debt is the amount of long-term debt principal that is due within the next year. •At the end of each accounting period, the long-term debt that is due during the next year is reclassified as a current liability.•Since the reclassification of most long-term debt as current does not usually change the accounts or amounts involved, journal entries are not required.
OTHER PAYABLES•Other payables for most retail companies include sales taxes, usage taxes, or excise taxes for various state, local, and federal taxing authorities.•These taxes are money collected from the customer for the governmental unit levying the tax. •These tax collections are liabilities until they are paid to the taxing authority.